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Friday, July 22, 2011

Moving Up to a Better Home? Watch for Bargains This Fall!

If you live in an older home that's not meeting your needs, this fall may be a great time to upgrade. Signs are developing in some market segments that bargains will appear.

Price and value have everything to do with supply and demand, as we all know. So look for value in market segments where there is an excess of supply and weak demand. If one of those market segments has the type of home you want, your timing is fortunate.

Your timing couldn't be better as to the cost of your mortgage loan. Interest rates are still at at historic lows. (How the US handles its debt issues and how bond markets respond could drive the cost of borrowing higher very soon, however.) The interest rate of your loan can affect your cost of homeownership far more than the price you pay for a property. The take-away these days is to corral as much cheap mortgage money as your comfort level and overall financial picture permits.

If you want to move this fall, now is when you need to see your mortgage banker. Moving up is not as easy as it used to be. The bank is going to want to know what you are doing with your present home. You might not want to sell it and have to be out not knowing where you are going to live next. And no seller will pay attention to you if you make an offer asking the seller to wait for your home to sell. So if you are keeping your home, the lender is going to look at how much equity you have in it. And, they will want you to qualify for that payment, as well as the payment on your next home. And, the lender may want you to make a large down payment on that next home. And, after all that cash commitment, the lender may still want to look at how much money you have left in reserve, such as in retirement accounts and other savings and investments.

So see your banker now. You must have that financial plan in place before you shop. You won't have the luxury of figuring out how you are going to pay for that next home when the opportunity presents itself.

Assuming you and your banker have comfort with each other, where are bargains? That's the "excess-supply-weak-demand" formula. And this fall it's possible that the kinds of homes that many local homeowners would choose for a move up are going to be in their sights.

These homes are often owned by people whose employers move them around regularly. They are in Anchorage for three or four years, then it's back to Lower 48, or overseas. These same employers give them financial incentives in the form of cash payments to get their homes sold. That gives them an edge on the market, enabling them to price their homes aggressively.

Another employee benefit can be the employer's promise to acquire the home if it doesn't sell. When that happens, the employer's third-party relocation service provider puts the home back on the market as an "inventory property".

If this fall market develops as I believe it might, the bargains will be the alignment of three stars that explain weak demand and excess supply.

This summer we are seeing the usual transfers of corporate employees out of Anchorage. It's not "last one out turn off the lights". Just normal activity. That's the first star.

The oversupply would develop because of weak demand. Second star: not as many corporate transfers into Alaska appear as would be required to purchase the homes of those who are leaving.

Third star: because of tighter financing requirements for local upgraders -- that's why I want you to see your banker now -- many Anchorage homeowners can't afford to move into one of those homes. Fewer buyers explains weak demand.

If those stars align as I believe they could this fall, and you are prepared with your financing plan, you could be very pleased at the prices of some of the homes. A corporate seller, for instance, is not going to want to keep an inventory property over the winter. It will be priced for a very prompt sale. When it is, you won't have long to react. At the right price, no matter how weak the demand, anything will sell. If you are ready, you will benefit before the next folks.

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